Cholamandalam seeks up to ₹5,000 crore as its loans outgrow a flat profit

Cholamandalam Investment and Finance lends across India for trucks, cars and tractors, homes and small-business property, plus gold and unsecured consumer loans. For the September 2026 quarter it reported pre-tax profit of ₹2,188 crore, 39.7% more than a year earlier. On the same day its board approved raising up to ₹5,000 crore of new capital, subject to shareholder and regulatory approval. Read side by side, the two announcements describe a lender whose loan book is now growing faster than its profit, and which wants outside money to keep the lending pace.

The year-on-year comparison is mostly about last winter. Nearly all of the rise in quarterly profit came in the two quarters that ended last March. Since then profit has hardly moved: last quarter's figure is 2.1% above the level six months earlier, while total assets grew 10.0% over the same six months. Management credits the yearly gain largely to a lower credit cost, the share of the loan book set aside for or lost to bad debts, which lifted pre-tax return on assets.

Last quarter shows why the line has gone flat. Against the quarter before, revenue left after paying interest rose 1.8%, while the interest bill itself rose 8.2%. Operating costs and loan-loss provisions together rose faster than that revenue too, and pre-tax profit slipped. The company says the second half of its year is usually the stronger one.

Funding costs are where management's view edged up. In July the chief financial officer said cost of funds might rise by around 10 basis points but expected the full-year figure, as a share of average assets, to match the year before. He now expects cost of funds to rise by around 15 to 20 basis points year on year, assuming one more increase in the central bank's policy rate on top of the one already made. Management plans to raise rates on its home loans and loans against property in the current quarter, which would recover part of that cost only as those loans reprice.

Credit quality is the other lever. In May the company guided to loan growth of 20% to 23% for the year and a net credit cost of around 1.5%. Halfway through, it reported growth of 25% and a credit cost of 1.4%, already below the full-year guide, and left both targets where they were. Further gains in return on assets will depend on how much better credit, pricing and fees get over the rest of the year, while the book keeps expanding.

That growth is what the capital raise is for. The executive chairman said the aim is to strengthen capital adequacy and the balance sheet so the company can carry its growth: "The capital raise, we will do. It depends, obviously, on market conditions." The chief financial officer put the timing at six to nine months, in all equity or a mix of equity and convertible instruments. The upper limit equals 14.5% of shareholders' equity at the end of September, calculated from the filed balance sheet. How many shares that means will depend on the market price when the company raises the money.

The raise does not come from a stretched balance sheet. Shareholders' equity grew 13.4% in the six months to September, faster than assets, and the convertible debentures still unconverted in May had all been converted into shares by September. Capital adequacy, the regulator's measure of capital against risk-weighted loans, rose from 19.21% in March to 20.62% at the end of September. The request looks ahead instead: on these figures, a book growing by a quarter a year while profit holds level would see leverage climb unless new equity arrives.